It was a strong holiday-shortened week, with the Dow Jones up 1.28%, the S&P 500 rising 1.25% and the NASDAQ soaring 2.00%. Global markets also participated in the rally with the MCSI Emerging Markets Index jumping 1.87%.
Big gainers in your Bull Market Alert portfolio included Tata Motors Limited (TTM), which soared 8.97%; The Bank of Ireland (IRE), which recovered 4.37%; and Visa Inc. (V) which gained 3.45%.
Two of these positions — Tata Motors Limited (TTM) and Visa Inc. (V) — crossed back above their 50-day moving averages and moved back to a BUY.
Three of your Bull Market Alert positions hit new 52-week highs: AbbVie Inc. (ABBV), Tata Motors Limited (TTM) and Flextronics International (FLEX).
After any big moves in a stock, it is always a good rule of thumb to take profits on option positions. So I am recommending that you sell your Tata Motors July $38 call options (TTM140719C00038000) for a 53.85% gain. Raise your stop to $41.57 to lock in at least a 10% gain in the stock.
Now that the stock has settled, I am recommending that you take an option position by buying the Flextronics International October $11 calls (FLEX141018C00011000). These calls expire Oct. 18.
This week’s Bull Market Alert recommendation, 3D Systems (DDD), revisits one of last year’s big investment and trading themes — 3D printing. Recall that 3D printing involves designing an object on your computer using three-dimensional software like “Computer Aided Design” — and then the “printer” actually manufactures the product right then and there.
After a red-hot 2013, 3D printing stocks have had a lousy 2014. In fact, many investors aggressively sold 3D printing stocks short, betting on their eventual demise.
Recently, however, these same investors have been feeling the pain of the tech market rally. This has led to lots of “short covering” — that is, investors buying back stock they sold short — which has driven the stocks up sharply in recent weeks.
Among all the major 3D printing stocks, 3D Systems has the largest short interest, with 34% of its stock float held by short sellers as of June 13. No matter what your arguments about valuation, assuming 3D Systems is not going belly-up, all short sellers will have to throw in the towel at some point.
I’m betting with over a third of 3D Systems’ stock still sold short that the short covering process is just beginning, providing a solid tailwind for this stock.
So buy 3D Systems (DDD) at market today, and place your stop at $47.00. If you want to play the options, I recommend the November $60 calls (DDD141122C00060000), which expire Nov. 22.
Here’s a word of warning. You can expect a lot of volatility in this recommendation as traders attempt to move the price sharply in their favor.
Portfolio Update
The Bank of Ireland (IRE) gained 4.37% over the holiday-shortened week. IRE’s $14.00 price level held as support for nearly three months back in late 2013, then saw IRE take off on a tremendous rally. IRE’s current $14.00 near-touch in mid-May, followed by the small move higher from $14.00 over the last two trading days, sets up another bullish case. IRE is scheduled to report earnings on Aug. 1, before markets open. IRE is a HOLD.
AbbVie Inc. (ABBV) added 2.52% last week and hit a new 52-week high. Barclays upgraded ABBV last Wednesday to “Overweight” and raised its price target to $69.00. This represents a potential 18.5% move above Friday’s close. ABBV is scheduled to report earnings on July 25, before markets open. ABBV is a BUY.
Tata Motors Limited (TTM) jumped 8.97% and hit a new 52-week high. Stocks in the Indian market enjoyed a bullish boost last week after Finance Minister Arun Jaitley made positive comments regarding an upcoming government budget. TTM moved above its 50-day moving average to return to a BUY.
Visa Inc. (V) gained 3.45%. Visa released its Visa Everywhere Travel Report last week, reporting on spending at the 2014 FIFA World Cup in Brazil. Large spending increases will not only benefit the Brazilin economy but will surely help Visa’s bottom line as well. V will report earnings on July 24, after markets close. Visa moved back to a BUY.
Alcoa Inc. (AA) added 1.49% for its first week in the Bull Market Alert portfolio. Alcoa will report earnings on Tuesday, after markets close. Earnings season begins this week as companies start telling investors how their past three months went, sometimes tipping their hand on expectations for their upcoming three months. This latter bit of information is a critical point in any good buy/sell decision. Alcoa is well known as being the first major U.S. company to report earnings each quarter, and its report officially kicks off earnings season. AA is a BUY.
Latest Special Report
I encourage you to read the newly updated version of The Top 12 Stocks You Should Buy Right Now, which features three of my top investment recommendations for the second half of 2014, as well as bonus picks from each of my fellow investment newsletter editors at Eagle Financial Publications.
